"Indirect" IRA rollover question

Factual Questions
1

I have an IRA (Rollover plan from a 401k with a previous job) which I would like to roll over into my own new IRA with another provider - from what I understand, I can simply do the following, without tax penalty:

  1. Ask for a check from the current IRA provider, specifying that I do not want taxes withheld
  2. Deposit said check in my bank
  3. Open a new IRA with the provider of my choice for the same amount of the old one within 60 days of receiving the check (I would do it right away)
  4. Report the rollover somewhere on my 1040

Correct?

2

Yes you can.

Keep in mind that you cannot do another indirect rollover for another 12 full months. Until recently, the IRS enforced a policy of allowing one indirect rollover per IRA account per rolling 12 month period. A recent court ruling said that can only be once per taxpayer, regardless of how many IRA accounts they have. The IRS has indicated that it will acquiesce to that ruling.

And, just to head off some incorrect information, federal tax withholding is optional for distributions from IRA accounts, unlike 401(k) and other employer plans. But you must make an election not to have taxes withheld. Be sure to read the withdrawal paperwork carefully and check the box that says you do not want withholding. State withholding policies may vary.

And be careful not to miss the 60 day deadline. That’s 60 calendar days, not 60 business days. Don’t risk screwing up by pushing it to the last minute. Leave yourself plenty of time in case something goes wrong.

And be sure to notify the custodian of the account where you deposit the funds that this is a rollover.

3

And if they’re different types (Traditional vs. Roth) you have to take the extra steps to convert or recharacterize it and pay any applicable taxes. Doable either way though.

4

While (I assume) the above info is correct, why would you want to? It’s going to raise questions from the IRS and additional paperwork (when the IRS tries to charge you taxes on the rollover, and you have to supply all of the documentation that you actually did roll it over).

Why not just do a direct rollover into the new IRA? Most IRA plans allow you to open an account with no funds and the promise of a future roll over.

J.

5

I agree with jharvey963. Any place at which you open an IRA will be happy to help you do a direct rollover and they’ll walk you though the paperwork.